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A.1. Steak Sauce: Lawry’s Defense
Transcript of A.1. Steak Sauce: Lawry’s Defense
A1 was first sold in North America in the early 1900's
Kraft foods acquired A.1 in 2000
Single largest steak sauce supplier in 2002 by sales
Extremely high brand awareness
A.1. product lines included:
Sweet & Tangy
Bold & Spicy
Thick & Hearty
New marinades line
The King was so delighted with the sauce he declared it to be "A1"
First developed in 1830 by Henderson William Brand, chef to England's King George
A1 Steak Sauce:
Steak Sauce Market
$300 million dollar industry
Dollar sales in the steak sauce category has grown in recent years due to price increases
Unit and volume sales has been flat
Brand loyalty in steak sauce is high
Beef consumption, a major complement of steak sauce, has stabilized over recent years
Available at virtually every grocery store across the US
Also, available at most mass merchandisers & club stores
A1 currently holds 48% of steak sauce shelf spacing at retail stores
30% of revenue was spend on promotion
15% was spent on advertising
10% was spent on in-store promotional efforts or trade promotions
5% on consumer promotions
Four FSI (free standing promotions) are planned for 2003
1 for each quarter
Cost $1,000,000 each
Includes $.50 coupon for A1 steak sauce
Potentially reaches 50 million households
A1's Market Share
A1 Steak Sauce currently holds 46% of volume share and 54% of dollars sales within the steak sauce market
Revenue in 2002 was $150 million and operating profit was approximately $ 60 million
Most popular during Memorial Day and July 4th and receives 10% of its profit during that period
A1 relaunched A1 marinades line in 2002 in compete in the fast growing marinades market
Revenue was $15 million but experienced a loss of $10 million in operating profit
Currently holds 10% of market after only one year since relaunch
High brand awareness
50% market share on steak sauce
History of excellence
High contribution margins
Diverse distribution network
10% market share on marinades after only 1 year
Operating loss from marinades
Small niche market (Only Steak)
Steak sauce market segment is mature
Kraft's manager from Publix received a tip that Lawry's is launching a new steak sauce line
It had a April 1st start ship date in order be stocked in stores for Memorial Day and July 4th
Lawry's is asking Publix for the Memorial Day ad to run its two-for-$5 promotion
A1 Steak Sauce usually runs a $.50 cent off promotion during Memorial Day
A1 usually secures the ad's for all grocery papers
Publix is now asking if A1 is going to match the offer or should he go ahead and run Lowry's promotion
What are your thoughts about A1 sauce?
Fast growing marinades market
Supporting a partnership with beef producers
Increasing dollar sales for the steak sauce industry
Steak consumption has recently stabilized after a period of decline
Flat unit sales in steak sauce industry
Potential new competitors offering cheaper prices
Company goal for this year: A 10% profit growth target to improve stock prices
What overall marketing strategy will adversely affect our competitor's new product launch without diminishing our current planned profit increase of 10% over last year?
"You know A.1 has the strongest brand equity in the category. Our customers just aren't going to go for some second-tier brand....We shouldn't overreact."
Jennifer Miller, Research manager
"...But Publix is ready to give Lawry's the Memorial Day key week promotion because Lawry's has much better pricing. We get 10% of our sales that week.... I actually think we should go for a two-for $4 promoted price."
Steve Johnson, Sales Manager
"Do you have any idea how much that would cost? I know defense sounds great, but we need to be a little realistic...We all know Kraft Foods needs us to deliver our profit number.... Spending like drunken sailors in just a bad idea.
Diane Sheridan, Finance Manager
Ideas from A1 team
about Lawry's steak sauce problem.
Introducing a promotional 12 ounce bottle with estimated cost increase of $3.73M
Break the Memorial Day ad early promoting the 12 ounce bottle.
Utilize the existing advertising budget to reinforce the heritage, tradition, and premium taste of A1.
Reduce current loss from marinades and tap in a growing market by running an
additional FSI at a cost of $1 million
Maximize use of in-store displays
Which idea do you support?